Addressing￿Questions￿on￿the￿U.S.￿Marijuana￿Market

May25,2021

AddressingQuestionsontheU.S.MarijuanaMarket

HEALTH CARE AND CONSUMER STAPLES SECTOR REPORT

Companies Mentioned in This Report

Buy-Rated: ? Johnson & Johnson (JNJ - $170.55) ? Merck (MRK - $79.03) ? Pfizer (PFE - $39.81) ? Novartis (NVS - $88.02) ? General Mills (GIS - $63.05) ? Mondelez (MDLZ - $63.68) ? Molson Coors (TAP - $57.75)

Hold-Rated: ? Altria (MO - $50.32)

Prices and opinions ratings are as of market close on 5/24/21 and subject to change. Source: Reuters.

AttentiononthemarijuanaindustryhasgrownovertimeasmostU.S. statesandmanycountrieshavelegalizedmarijuanainsomeform. Whileexcitementcanbuildinanystart-upindustry,webelievethere aremanyrisksanduncertaintiesinboththemedicalandrecreational marijuanamarkets,andallformsofmarijuanaremainillegalunder U.S.federallaw.Webelievethatanyinvestmentinthemarijuana industryshouldbeviewedasspeculative.

MarijuanaRemainsIllegalUnderFederalLaw-Publicsentiment towardsmarijuanahasrelaxedovertheyears,andmostU.S.states havelegalizedmarijuanainsomeform.However,marijuanause remainsillegalunderU.S.federallaw,whichcreatesuncertaintiesfor companiesparticipatinginthemarket.

Key Marijuana Market Risks:

? Federally illegal in the U.S. ? Political and regulatory uncertainty ? Highly competitive market ? Price uncertainty ? Unpredictable consumer behavior ? Health & safety risks ? Stock volatility ? Stock prices implying expanding legalization

For more information:

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InvestmentsinMedicalMarijuanaMarketCarryRisk-Whilemany stateshavelegalizedaccesstomarijuanaformedicalpurposes, marijuanaitself,andCBDoil,havenotbeenapprovedbythe FDA.However,somepharmaceuticalcompanieshavedrugs(both marketedandindevelopment)thatarederivedfrommarijuana,ora syntheticformofmarijuana,andhavegonethroughtheappropriate FDAsteps.Thesecompaniesareprimarilydevelopmental-stage companies,concentratedinjustafewproducts,orcompaniesso largethatitisnotameaningfuldriverofsales.

Overall,webelievethatFDA-approvedproductsderivedfrom marijuanawillbejustasmallpartoftheprescriptiondrugmarket.We preferinvestorsgetexposuretoinnovationthroughpharmaceutical companiesthatarediversifiedbyproductandgeography,andthat haveanextensiveoperatinghistoryandexperiencebringingdrugsto market.

RecreationalMarketHasManyUncertainties-Evenifrecreational usewerefederallylegalizedintheU.S.,webelievetherewouldbe alargenumberofuncertainties.Wewouldexpectthemarketto beheavilyregulatedandtaxed,withmanyplayersandveryhigh competition.Wealsodon'tknowhowconsumerswouldchooseto consumemarijuana.Inthefood,beverageandtobaccosubsector,we prefercompanieswithstrongbrands,largermarkets,andaproven trackrecord.

Analyst: Ashtyn Evans, CFA Analyst: John Boylan, CFA

Please see important disclosures and analyst certification on page 4 of the report.

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TheMarijuanaMarket

U.S.MarketOverview-Publicacceptanceof marijuanausehasincreased,with66%ofAmericans nowfavoringlegalization,accordingtoarecent Galluppoll.Moststateshavelegalizedmarijuanain someform.However,marijuanaremainsclassifiedas aSchedule1drug,makingitacontrolledsubstance andillegalunderfederallaw.Businessesthatoperate inthosestatesthathavesomeformoflegalization aregenerallyprivatecompaniesorpubliccompanies thataren'teasilyavailablefortrading.Thefearof federalenforcementhaskeptbanksfromdoing businesswithmarijuanacompanies,andithaskept manylargeconsumercompaniesheadquarteredin theU.S.fromenteringthemarket.

MedicalMarket-Manystateshavelegalizedaccess tomarijuanaformedicalpurposes.However,the FDAhasnotapprovedmarijuanaasasafeand effectivedrugforanyindication.Whilemarijuana itself,andCBDoil,lackFDAapproval,thereare biopharmaceuticalcompaniesthathaveFDAapprovedproductsderivedfrommarijuana.These productsareapprovedforusessuchasnausea, vomiting,appetitestimulantsandseizures.The opioidepidemichasalsoledtoasearchfor alternativepainmedications,andweexpect anincreaseinthenumberofclinicalstudieson marijuana-derivedproducts.

Whilethemedicalmarijuanamarketisexperiencing impressivegrowthasaccessandacceptance increase,manyrisksexist,suchasevolving regulations,increasingcompetition,product concentration,andgeneralrisksassociatedwith biopharmaceuticalcompanies,suchaspolitical andregulatoryrisksandproductsafety.Overall,we believethatFDA-approvedproductsderivedfrom marijuanawillbejustasmallpartoftheprescriptiondrugmarket.

RecreationalMarket-Iflegalized,we'dexpectthe recreationalmarijuanamarkettobesignificantly largerthanthemedicalmarket.However,thereare manyuncertaintiesinhowthemarketdynamics wouldplayout.Themarketislikelytobeheavily regulatedandtaxed,withlimitationsonadvertising. Themarketisalsolikelytobeveryfragmentedwith significantcompetition,whichcouldcausepricing pressure.Theserisksmakeitdifficulttopredict howmuchoftheindustrywouldmovetothelegal marketversusstayintheillegalmarket.Thereis

alsouncertaintyinhowconsumerswouldchoose toconsumemarijuanaproducts?smoke,vapor, consumables,beverages,etc.

Othergeneralrisksincludeagriculture-relatedrisks associatedwithgrowingthecropandhealthand safetyrisks,giventhereisnoFDAsysteminplaceto regulateproducts.Forexample,thevapingindustry hascomeundersignificantpressurerecentlyfor illnessesanddeaths,someofwhichappeartobe tiedtovapingmarijuana-relatedproducts.Despitethe increasedpublicacceptanceofmarijuana,wewould expectthatiflegalized,thetotalmarijuanamarket wouldbesignificantlysmallerthantheU.S.alcohol andtobaccomarkets.

AddressingCommonQuestionsFromInvestors: Whataretherisksinvolvedwithgetting exposuretothemarijuanamarketthrough biopharmaceuticalcompanies? Therearemanypubliclytradedbiopharmaceutical companiesthathavedrugs(bothmarketedandin development)derivedfrommarijuanaorasynthetic formofmarijuana.However,theseareprimarily development-stagebusinessesthatcarrysignificant risk,inourview.Whiletheseproductsaregoing throughtheappropriatestepstogainFDAapproval, thecompaniesgenerallyhaveasmallnumberof drugs,andmanyarenotyetprofitable.Webelieve investorsshouldavoiddrugcompaniesthatare heavilyreliantonthesuccessofoneparticular product.

Wethinkinvestorsinterestedingainingexposureto new,innovativedrugsshouldlooktocompanieswith strongfundamentalsthatareprofitable,diversified, andhaveasuccessfultrackrecord.Whilesomeof thelargerbiopharmaceuticalcompaniesmaybe involvedinthesyntheticmarijuanaindustry,wedo notexpectittobecomeameaningfulpartoftheir business,giventhesmallerrelativesizeofthemarket formarijuana-basedproducts.

WillU.paniesbecomeinvolvedinthe marijuanamarket?

Severallarge,establishedcompanieshaveinvested tosomeextentinthemarijuanaindustry,including Novartis(NVS),Altria(MO),andMolsonCoors (TAP).Weviewtheseinvestmentsassmallrelative tothesizeofthesecompanies,andwewouldnot expectthesepartnershipstobemeaningfulto thecompanies'salesorprofitsintheforeseeable future.Giventhatmarijuanaisfederallyillegalin

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theU.S.,weexpectcompaniestobelimitedintheir involvementandfavorpartnershipstopotentiallygain exposuretothemarket.

Asaresult,wedonotrecommendmaking investmentdecisionsbasedoninvolvementor potentialinvolvementinthemarijuanaindustry, particularlygiventhesignificantregulatoryrisks andunknownsinthemarketplace.Instead,we recommendfocusingoncompaniesthathavestrong brands,operateinlarger,establishedmarkets,and haveaproventrackrecord.

WithrecreationallegalizationinCanada, doesEdwardJoneshaveanyCanadian recommendations?

Whilethereareanumberofpubliclytraded marijuanacompaniesheadquarteredinCanada, investorsshouldbeawarethattheyhavepoor profitabilityandlimitedoperatinghistory.Wewould consideranyinvestmentintheCanadianmarijuana markettobespeculative.Aswithanystartup companyinanew,growingmarket,inherentrisks exist.Anincreasingnumberofcompetitorsand changingregulationsmakeitdifficulttopredictwho theultimatewinnersandloserswillbe.Asidefrom therapidlychangingdynamicsinthemarijuana industry,newcompaniesneedtosecurefunding andfightformarketshareamongthenumerous competitors.

Largercompaniescouldalsogetinvolvedanddisrupt theCanadianmarijuanaindustry.Giventheevolving natureoftheindustry,weexpectthestockpricesof thesecompaniestoexperiencelargefluctuations. Lastly,thevaluationsformanyofthesecompanies reflectthepotentialopportunityformarijuanauseto becomelegalizedintheU.S.orotherinternational markets,andinternationaltradelawsaddalevel ofcomplexity.Wecannotpredictwithanydegree ofcertaintytheoutcomeoffuturegovernment regulations.Downsiderisktomarijuanastockprices likelyexistsiflegalizationdoesn'tmeaningfully expandbeyondCanada.

Whatisthebottomline? Anyinvestmentinthemarijuanaindustryshould beviewedasspeculative.Tobenefitfrommedical innovation,wepreferestablisheddrugcompanies thatarediversifiedbyproductandgeography,and thathaveextensiveoperatinghistoryandexperience bringingdrugstomarket,suchasJohnson& Johnson(JNJ),Merck(MRK)andPfizer(PFE).In

food,beverage&tobacco,weprefercompanieswith strongbrands,largermarkets,andaproventrack record,suchasMondelez(MDLZ)andGeneralMills (GIS).

Valuation Whenvaluingconsumerstaplesandhealthcare companies,weusevariousmethods,including,but notlimitedto,comparingprice-to-earningsratios(P/ E)andPEGYratios(price-to-earningsratiodivided bygrowthplusdividendyield)tohistoricalandpeer averages.Wealsousediscounted-cash-flowmodels toincorporatelong-termgrowthexpectations.

InvestmentRisks Somepotentialrisksinvolvedwithinvestingin theconsumerstaplessectorincludedeteriorating economicconditions,aslowdowninconsumer spending,risinginterestrates,highercommodity prices,andcurrencyfluctuations.Somerisksrelated tohealth-care-sectorcompaniesincludepolitical andregulatoryrisks,pricingpressure,andproduct failuresand/orliabilities.

Pleaseseetheindividualresearchreportsfor additionalinformation,includingdisclosures, analystcertifications,valuationandrisksspecific toeachcompany.

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AnalystCertification

Icertifythattheviewsexpressedinthisresearchreport accuratelyreflectmypersonalviewsaboutthesubjectsecurities andissuers;andnopartofmycompensationwas,is,orwillbe directlyorindirectlyrelatedtothespecificrecommendationsor viewscontainedintheresearchreport. AshtynEvans,CFA;JohnBoylan,CFA

RequiredResearchDisclosures

AnalystsreceivecompensationthatisderivedfromrevenuesofEdward Jonesasawholewhichinclude,butarenotlimitedto,investment bankingrevenue.

OtherDisclosures

Thisreportdoesnottakeintoaccountyourparticularinvestmentprofile andisnotintendedasanexpressrecommendationtopurchase,holdor sellparticularsecurities,financialinstrumentsorstrategies.Youshould contactyourEdwardJonesFinancialAdvisorbeforeactinguponany EdwardJonesResearchRatingreferenced. Allinvestmentdecisionsneedtotakeintoconsiderationindividuals' uniquecircumstancessuchasrisktolerance,taxes,assetallocationand diversification. ItisthepolicyofEdwardJonesthatanalystsortheirassociatesarenot permittedtohaveanownershippositioninthecompaniestheyfollow directlyorthroughderivatives. Thisopinionisbasedoninformationbelievedreliablebutnotguaranteed. TheforegoingisforINFORMATIONONLY.Additionalinformationis availableonrequest.Pastperformanceisnoguaranteeoffutureresults. Ingeneral,EdwardJonesanalystsdonotviewthematerialoperationsof theissuer. Diversificationdoesnotguaranteeaprofitorprotectagainstlossin decliningmarkets. Specialrisksareinherenttointernationalinvestingincludingthoserelated tocurrencyfluctuations,foreignpoliticalandeconomicevents. Dividendscanbeincreased,decreasedoreliminatedatanytimewithout notice. Anindexisnotmanagedandisunavailablefordirectinvestment. EdwardJones-MemberSIPC

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